Gold Fields’ profits shine as metal price surges

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Gold Fields reported a six-fold jump in its quarterly earnings per share on Thursday on the back of increased production, a surging gold price, and ongoing cost-cutting measures at its South African operations.

Presenting the results, Ian Cockerill, the company’s chief executive, presented a bullish outlook for the metal, which last week traded at a 25-year high. “We could see some pullback from these heights,” he said, referring to the current price. “However, we expect this secular upturn (to continue) going forward.”

Johannesburg-based Gold Fields, one of the world’s largest gold producers, reported adjusted earnings per share of 56 cents for the December quarter, up from 9 cents per share the previous quarter.

Gold Fields reported strong performance at both its South African and international relations, with operating profit at R958 m ($147 m), up 73 per cent from the September quarter. The company announced a dividend of 40 South African cents per share.

Gold Fields said that it expected production at its South African operations would decrease in the current quarter, mainly due to lower volumes at its Kloof mine. However, this should be offset by increased production at its international operations, making overall output similar to the December quarter’s attributable production of 1.04 m oz.

Gold Fields, like fellow South African producers AngloGold Ashanti and Harmony Gold, has in recent years seen the strong rand erode its margins.

However, with the rand remaining steady, the increase in the world-market gold price pushed the rand price Gold Fields receives up by nearly R10,000 per kg for the last quarter, Nick Holland, chief financial officer, said at Thursday’s results presentation in Johannesburg.

Like its peers, Gold Fields is diversifying away from South Africa’s strong currency, demanding regulatory regime, and maturing asset base. The company derived nearly three quarters of its operating profit from international operations in the last quarter, up from just over half previously.

Alongside its mines in South Africa, Ghana, and Australia, Gold Fields plans to start construction on a new mining project at Cerro Corona, in Peru, next month. John Munro, Gold Fields’ head of business development, said that the operation, due to produce 4.5m oz gold equivalent over 15 years, will be commissioned in late 2007.

Late last year Gold Fields offered $360m to take over Toronto-listed Bolivar Gold. US-based fund manager Scion Capital, a major Bolivar shareholder, is seeking to block the takeover in court.

Mr Cockerill declined to comment on the ongoing litigation. However, he said: “We still remain confident that the court will honour this transaction.”

Gold Fields’ chief executive also said that the company’s current expansion activities had put it “some way down the road” of trying to achieve its target of 1.5m oz additional production by 2009. “We’re already sitting at about 900,000oz of that 1.5m,” he said.

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